Financial advisers coaching clients through the pandemic with a disciplined approach to investing have added approximately 5.2 per cent in value to client portfolios according to a new report from Russell Investments.
The 2021 Russell Investments Value of an Adviser Report says advisers helped Australians avoid a “litany of poor investment calls” since the start of the pandemic in 2020, including pulling out their investments at the volatility trough in March last year.
“Throughout the COVID-induced market dislocation and recovery, the most critical mistake non-advised investors made was to not hold the line on their investment strategies and sell out of equities after dramatic market falls – and then find it hard to time a re-entry as the market roared back to life,” Russell states.
While advisers largely prevented their clients from being among those that pulled an estimated $40.5 billion out of the superannuation system when valuations were at their lowest, Russell says the 5.2 per cent savings figure comes from a number of sources.
“The value of an adviser calculation is drawn from five key elements: preventing behavioural mistakes (2 per cent); advising on appropriate asset allocation (1.1 per cent); optimising cash holdings (0.6 per cent); tax-effective investing and planning (1.5 per cent); and the priceless value of expert wealth management knowledge derived from years of market experience,” Russell states.
Russell’s head of business solutions Bronwyn Yates said the events that unfolded during the heat of the pandemic have only underscored the important role advisers play.
“Investors that have been educated by a financial adviser understand there will be ups and downs along their financial journey, so they feel comfortable in staying the course,” Yates said.
“However, non-advised investors struggle to make the correct decision when markets are volatile, and often attempt to time the market. This is an issue which plagues both those with loss aversion, and those convinced they can beat the market. It’s also a timely consideration for the growing ranks of millennials and Gen Z turning to fin-fluencers as their source for financial advice.”